Brian Calle: Kings to OC no slam dunk

Getting lost in the sexiness, glitz and glamour of having a National Basketball Association franchise in Orange County is easy to do. Those of us living behind the "Orange Curtain" have a strong sense of community identity – very distinct and separate from Los Angeles – and having our own NBA team to compete against the two L.A. outfits would enhance the distinction.

Another element of the traditional Orange County identity is conservatism and support for a limited role for government. While the proposed deal to move the Sacramento Kings to Anaheim is exciting, the process ought to raise questions, starting with: Why should government be involved at all?

Involvement in activities like sports teams and the facilities at which they play and practice, should ultimately be left to private companies. Instead, because two cities – Sacramento and Anaheim – previously opted for ownership of sports arenas and investment in those facilities in the name of "public good," today politicians and public workers at both the state and local levels are diverting attention to what should be a wholly private decision. When considering the state and cities are facing more pressing matters like, for instance, large budget deficits, suffering education and ballooning public employee pension costs, the point is further emphasized. Fortunately, Anaheim's involvement in this deal helps secure a team without taxpayer funding, though, ideally, the city would not have to be involved at all.

The Anaheim City Council voted unanimously last month to authorize $75 million lease revenue bonds – $25 million for renovations to the 18-year-old, city-owned Honda Center, and $50 million in capital to pay for relocation fees and other expenses in moving the Kings to Anaheim. The action by the council was a result of negotiations among the city, the Maloof family (the owners of the Kings) and Henry Samueli, the Orange County billionaire who owns Anaheim Arena Management, the company that operates and manages the Honda Center, and the Anaheim Ducks, which play at the arena.

Of course, the bonds became a red flag to many because questions were raised as to whether or not taxpayer dollars would be used to support the potential move of the NBA franchise. When asked about the situation, Anaheim Mayor Tom Tait has said that "taxpayers will not be on the hook or assume any risk whatsoever" for the deal. That's a good thing. The city is involved mostly as a facilitator of the transaction because it owns the Honda Center.

Taxpayers are shielded from risk in bringing the Kings to Anaheim because the bonds are guaranteed by Samueli interests, according to the city's finance director, Bob Wingenroth. A revenue bond, like this one, is repaid by income from the project being financed. The city is essentially acting as a financing conduit for private investments or, as Tait described it, "an escrow company." "We haven't given them any money, and we haven't backed any debt," Wingenroth told me when I visited his office last week. It is unclear if there are tax advantages for Samueli – the agreement indicates no, but at least one bond adviser I spoke to said these kinds of bonds usually come with favorable tax treatment.

Even so, why must the city issue bonds? And why would Samueli and company opt to go the public-bond route rather than with completely private financing unless there were incentives for doing so? Will it make bond financing costs lower?

Wingenroth explained that Anaheim's involvement is mostly predicated on its ownership of the arena. Because the city owns the property, it has a vested interest in the improvements being done to the property to maintain or enhance the value of this taxpayer investment. Fair enough, up to a point. In fact, in 2003 the city issued $42.6 million in bonds for renovations to the arena in a similarly privately backed deal and, the city says, no taxpayer risk; this new bond follows the same approach.

Still, broader discussion is needed around taxpayer involvement in funding "investments" like sports arenas. Absent from the public discourse thus far is any talk of selling Honda Center outright to a private entity, an action that would absolve the public of all responsibility and put the transaction completely in private hands where it belongs. At least Anaheim is not considering a route similar to the one taken in 2006 by Sacramento and its elected leaders on the Sacramento County Board of Supervisors, who went so far as to put a ballot initiative up to voters to increase that county's sales taxes to fund a new arena for the Kings. It failed, and rightly so.

The marketplace could surely handle this transaction, given Orange County's desirability in terms of audience, size and arena amenities. If Orange County were one big city it would be the third-largest city, by population, in the country. Also, the Honda Center gives more opportunity to monetize basketball games because of its sheer size compared with the subpar Power Balance Pavilion. Honda Center has more general admission seats, significantly more luxury suites and more club-level seating. It's a no-brainer from an economic perspective.

But government involvement has turned what could have been a reasonably smooth private transaction into a complex contest between leaders of two California cities using all the "juice" each one can muster among legislators in Sacramento and the lobbyists paid to influence both them and public opinion. That means more roadblocks ahead:

• NBA Commissioner David Stern suggested Thursday night the league might forestall a team move to Anaheim for a year to see if Sacramento officials can make good on promises to build a new arena, The Associated Press reported.

• State Senate President Darrell Steinberg, who represents Sacramento, has proposed legislation that would hamper the move. Thursday and Friday, he and others met behind closed doors with NBA officials visiting California on a fact-finding mission.

• Sacramento Mayor Kevin Johnson announced Thursday that he had raised $9.2 million to keep the Kings in Sacramento.

• Sacramento-based consultant Rob Stutzman, who is leading an effort to collect signatures from Anaheim voters to qualify a referendum on the city ballot to block Anaheim from issuing the bonds to facilitate the deal, announced Thursday that his group has collected at least 11,000 signatures, enough the qualify for a referendum, which they intend to submit to the city for verification this week. He told me "once we turn the signatures in for verification, that will have the effect of staying the council's resolution," essentially blocking issuance of the bonds until a referendum election is held, which could be as late as June 2012.

• NBA team owners must also vote by a simple majority to authorize the potential move. The mayors of each city made proposals for why their city is the best choice for the team at an NBA Governing Board meeting in New York on April 14. As a result of claims made at that meeting, the board has extended the deadline to file for relocation to May 2 and embarked on their trip to California to verify claims made by both parties. Not to mention that Lakers owner Jerry Buss and Clipper owner Donald Sterling aren't thrilled about a third team in their market.

• And last month, Sacramento Assistant City Manager John Dangberg sent a strongly worded email ordering Anaheim to "cease negotiating with the Kings" because if the team left Sacramento it would do "irreparable harm" and could have a "blighting impact" on the city. He also said the brothers Joe and Gavin Maloof owe the city $77 million for bonds issued to refinance debt on Power Balance Pavilion, where the Kings currently play, if they were to move. The Maloofs have made numerous assurances, though, that they have every intention of paying the debt.

It is clear that politicians and special interests in Sacramento have been the driving force behind prolonging, blocking and obstructing the move by the Kings from Sacramento to Anaheim because the city and the city's elites have entrenched economic interests in the team staying put. If the city did not own the arena or had never made the poor decision to finance millions of dollars in renovations to the arena on behalf of the team, Sacramento taxpayers would be shielded from any financial burden, the city would not be vulnerable and market forces would dictate where the franchise lands. That, however, is not reality.

As a huge NBA fan, I'd selfishly like to see the Kings move to Anaheim. And as an OC resident, I see the cultural benefits it would add to our community. As someone who reveres free-market capitalism and holds a commitment to a limited government philosophy, I'd like to see it done without government interference or involvement. Anaheim's approach is much better in terms of allowing private forces to be the driver of the process. Within the status quo, though, where cities own arenas and compete with each other for the perks of having a sport's franchise, it seems impossible to have government absent from these types of deals. But it doesn't have to be. When the smoke clears from this deal, the next battle waged by Anaheim leaders ought to be one that seeks to privatize functions of cities that are not essential to the well-being of residents. Perhaps a starting point could be selling city-owned arenas.

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MCT ILLUSTRATION / PHOTO ILLUSTRATION: MIKE TIPPING, THE REGISTER
Sacramento Kings season ticket holder Donna Blum wipes a tear from her eyes as she and her husband, Mark, stay after the Sacramento Kings lost to the Lakers 116-108 in Sacramento April 13. ASSOCIATED PRESS
In this Feb. 28, 2011, file photo, Sacramento Kings fans Tim Ghiorso, Blake Richardson, and Tyler Brandt, left to right, show their support for the team before the Kings' NBA basketball game game against the Los Angeles Clippers in Sacramento, Calif. All signs at the time indicated the Kings will move south to Anaheim after the season. ASSOCIATED PRESS FILE PHOTO
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